Many employment agreements and incentive programs contain “choice of law” provisions. A choice of law provision identifies the state’s law that will apply to any dispute arising from the contract or incentive program. In Texas, the law of the state chosen by the parties to govern their contractual rights will be applied unless either:
(a) the chosen state has no substantial relationship to the parties or to the transaction and there is no reasonable basis for the parties’ choice; or
(b) Texas has a materially greater interest than the chosen state in the determination of the particular issue and would be the state of applicable law in the absence of an effective choice of law provision and the application of the law of the chosen state would be contrary to a fundamental Texas state policy.
Choice of law provisions are favored by employers with employees in multiple states--especially in incentive programs and in standardized contracts--because they offer uniformity and predictability. By using choice of law provisions, an employer can help ensure that disputes arising from its contracts and programs will be resolved consistently, regardless of where an employee resides.
This article is presented by the Dallas employment contract lawyers at Clouse Dunn LLP. To speak to an employment lawyer about a contractual matter, send an email to email@example.com or call (214) 239-2705.